A-Share Industry Rotation Using Momentum and Macro Regimes

Summary

This article explains industry rotation in China’s A-share market, describing how economic cycles, policy, fundamentals, and herding can cause leadership to shift across sectors. It outlines a momentum approach that ranks industry indexes by weighted returns over multiple periods, selects a leading industry, and buys its largest stocks. Other implementation choices include buying a sector ETF or using rolling out-of-sample forecasts from a model with industry factors. A macro allocation discussion links growth and inflation regimes to broad asset classes and defensive or cyclical sectors.

The article cites research on sector momentum and reversal, including claims that effects vary by daily, weekly, and monthly horizons, but it supplies no backtest results for its example portfolio. It cautions that parameter searching can overfit historical data, short-horizon signals may drive costly turnover, and momentum can periodically fail as market structure, sentiment, or policy changes. The sector and regime relationships are presented as general guidance rather than reliable forecasts, and implementation costs and validation remain essential.

Key ideas

• Industry leadership may shift with economic cycles, policy, fundamentals, and investor behavior.
• The example ranks industry indexes by weighted returns, then selects stocks from the strongest industry.
• A rolling industry-factor model is presented as another way to forecast sector returns.
• The article relates growth and inflation regimes to asset classes and sector styles.
• Overfitting, high turnover costs, and unstable momentum are highlighted as key risks.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.